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Differing perceptions of non-executive directors’ roles in UK SMEs: Governance conundrum or cultural anomaly?

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  • Boxer, Rosie
  • Berry, Aidan
  • Perren, Lew

Abstract

This paper presents a new model for the development of trust in the working relationships between managing director (MD) and non-executive director (NED) dyads in UK small- and medium-sized enterprises (SMEs). It proposes a NED role trust typology of NEDtells, NEDadvises and NEDacts. This typology is influenced by the literature on trust development in working relationships within corporate governance and in small business contexts. When UK SME NED role practice is mapped against this new model, different patterns of NED role trust emerge for MDs and NEDs. The MDs perceive a role biased towards NEDadvises, whereas the NEDs perceive a role that is balanced between NEDtells and NEDadvises. This dual role was described by one NED respondent as being ‘schizophrenic’. This paper presents and discusses these findings and the implications for the wider corporate governance debate on NEDs, with particular reference to the recent UK banking crisis. The new model presents a possible explanation for governance failure attributed to the NEDs’ behavior and recommends that further research investigate whether the CEOs and the MDs that also act as NEDs on other boards exhibit these different patterns of NED role trust. Do they exhibit another form of schizophrenia or are they chameleons, that is, able to switch between different patterns of NED role trust with ease? Or are they just NED role impersonators, analogous to a contestant on Stars in Their Eyes? “Tonight Matthew I’m going to be … a non-executive director!”

Suggested Citation

  • Boxer, Rosie & Berry, Aidan & Perren, Lew, 2012. "Differing perceptions of non-executive directors’ roles in UK SMEs: Governance conundrum or cultural anomaly?," Accounting forum, Elsevier, vol. 36(1), pages 38-50.
  • Handle: RePEc:eee:accfor:v:36:y:2012:i:1:p:38-50
    DOI: 10.1016/j.accfor.2011.11.003
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    References listed on IDEAS

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    1. van Ees, Hans & van der Laan, Gerwin & Postma, Theo J.B.M., 2008. "Effective board behavior in The Netherlands," European Management Journal, Elsevier, vol. 26(2), pages 84-93, April.
    2. Jonas Gabrielsson & Morten Huse, 2002. "The venture capitalist and the board of directors in SMEs: Roles and processes," Venture Capital, Taylor & Francis Journals, vol. 4(2), pages 125-146, April.
    3. De Clercq, Dirk & Sapienza, Harry J., 2006. "Effects of relational capital and commitment on venture capitalists' perception of portfolio company performance," Journal of Business Venturing, Elsevier, vol. 21(3), pages 326-347, May.
    4. Robert J. Bennett & Paul J. A. Robson, 2004. "The role of trust and contract in the supply of business advice," Cambridge Journal of Economics, Oxford University Press, vol. 28(4), pages 471-488, July.
    5. Stiles, Philip & Taylor, Bernard, 2001. "Boards at Work: How Directors View their Roles and Responsibilities," OUP Catalogue, Oxford University Press, number 9780198288763.
    6. Morton Deutsch, 1958. "Trust and suspicion," Journal of Conflict Resolution, Peace Science Society (International), vol. 2(4), pages 265-279, December.
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